Read the article written by Adam Turner “Netflix slugs Aussies with price rise alongside GST tax hike” published in Sydney Morning Herald, 28 June 2017. Answer the three questions that follow the article using economic models where appropriate.
Q1. Using demand and supply model, explain and illustrate why Australians will have to “pay up to 20 per cent more” for online streaming.
Q2 (a). Use the determinants of price elasticity of demand to analyse whether the demand for online streaming in Australia is likely to be price elastic or inelastic.
Q2 (b). Based on your answer to Q2(a), explain what effect you would expect the price rise to have on the total revenue of the online streaming industry. Illustrate your conclusion using an appropriate economic model.
Q3. Based on your answer to Q2(a), explain who will bear most of the incidence of the ‘Netflix tax’, and illustrate your conclusion using an appropriate economic model.